Markets generally quiet ahead of big risk events

Headlines

* Traders fret as 32-hour central bank spree hangs over market

* Treasuries are set for longest winning streak in three years

* McDonald’s hit by first global sales drop since 2020

* Dollar, stocks steady at start of busy week of data and rate decisions

FX: USD firmed, up to 104.75 before paring gains. Data was light as markets prepared for a bumpy few days with the potential for a rate hike, hold and cut by the BoJ, Fed and BoE respectively. There are also some big US data points with JOLTS, ISM Manufacturing and NFP.

EUR fell to 1.0802 before buyers stepped in. Focus is on central banks elsewhere. But there are some big figures released including EZ GDP tomorrow and inflation on Wednesday. Remember that the ECB is heavily data dependent now, having ditched forward guidance.

GBP outperformed modestlyas traders looked towards the Bank of England meeting on Thursday. Money markets are pricing in marginally more chance of a rate cut, with currently around 14bps (56% chance) instead of last week’s 11bps (44%).

USD/JPY steadied on the day finding some buyers to trade just above 154. That comes after three strong weeks of selling, with prices dropping from 161.95 to 151.93. The unwinding of the yen carry trade due to US-Japan rate differentials narrowing, plus Trump’s weak dollar rant are mainly responsible.

AUD steadied again for a second day after nine straight days of selling. CPI is released on Wednesday and will be key for the upcoming RBA meeting. The NZD sold off for an eighth day in row but is now oversold and should find support around the April low at 0.5852. USD/CAD pushed higher for a ninth consecutive day. Prices have just moved above the April top at 1.3846 but are overbought. A dovish leaning Fed might be the loonie’s best hope of halting or at least slowing the rally in the major.

US Stocks: US markets enjoyed mild gains with outperformance in the Nasdaq and tech. The benchmark S&P 500 closed 0.1% higher at 5,464. The tech heavy Nasdaq 100 finished up 0.2% at 19,059. The Dow Jones finished 0.1% off at 40.540. McDonald’s actually rose, even though it missed estimates, as the $5 meal deal has been well received. But the fast-food giant does see negative Q3 trends across all segments. Tesla jumped over 5% as investment bank, Morgan Stanley, added the EV-maker to its “Top Pick” list in US autos, replacing Ford. Apple pushed back the release of its new AI features in its upcoming iPhone and iPad updates to October from September.

Asian stock futures are mixed. Asian stocks traded mostly higher after Wall Street picked up on Friday. The ASX 200 saw tech and telecoms drive gains. The Nikkei 225 outperformed and gapped above 38k. The Hang Seng went higher on global risk sentiment. But the Shanghai Composite struggled after stalling above 2,900.

Gold printed a doji with prices just above the midpoint of the recent near-four month range at $2380. The 50-day SMA sits at $2358.

Day Ahead – Eurozone GDP, JOLTs

Expectations are for the region’s quarterly growth to slow to 0.2% from 0.3% with the annual rate seen rising to 0.6% from 0.4%. GDP in Q1 picked up to 0.3% from 0.0% due to more stable energy prices, lower inflation and stronger wage growth. Any kind of positive growth in the bloc would be the first back-to-back increases in quarterly GDP since 2022. That said, growth is expected to slow on account of ongoing weakness in industrial output, particularly in the region’s powerhouse, Germany. Going forward, the economic recovery may improve due to lower interest rates, which should mean some improvement in credit conditions.

JOLTs job figures out of the US kick off a week which ends with monthly non-farm payrolls data. Job vacancies have been watched, and especially the quits rate, as that data has been a good lead signal for wage growth and inflation (employment cost index) in the past.

Chart of the Day – Microsoft leads a big Big Tech earnings week

Microsoft kicks off megcap results this week with numbers published after the US closing bell today. The company remains the biggest single stock in both the S&P 500, and the Nasdaq 100. But it has underperformed tech with gains of aorund 13% year-to-date. Options imply a move of +/- 4.2%, over earnings. Consensus, for this quarter, sees EPS at $2.94, on quarterly revenues of $64.5 billion. Intelligent Cloud could be a source of upside, while Azure’s imprtoance will be keenly scrutinised.

Prices have fallen since printing record highs at $468.35 at the start of this month. But the stock has found support aorund the 100-day SMA at $426.65. A near-term minor retracement level is at $430.72. The next Fib level (38.2%) of the Septebmer 2023 low to the recent July high is $407.65. The 200-day SMA hovers just below here at $402.11.

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